‘RomneyCare’ — a revolution that basically worked

The former governor’s health plan is a policy piñata among his rivals. But a detailed Globe review finds the overhaul has achieved its main goals without devastating state finances. The remaining worry is future costs.

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Second of two stories on Mitt Romney and the state health care overhaul.

On a sunny autumn afternoon in October 2008, Mitt Romney and his wife, Ann, met New Hampshire portrait artist Richard Whitney at the State House and went to the governor’s office he once occupied on the third floor.

About eight months earlier, Romney had dropped out of the race for the Republican presidential nomination, and his successor, Deval Patrick, had arranged for them to use his office to shoot photos to be used for Romney’s official portrait, which would be unveiled the following year.

The artist and former governor had already met at Romney’s vacation home in Wolfeboro,, N.H., to discuss the painting, and Romney was clear on the image he wanted to convey for posterity.

He would be at his desk, wearing a light blue business suit and tie. Visible in the frame would be symbols of what he held dear and how he wanted to be remembered.

One was a photo of Ann, center of his personal universe.

The other was an official-looking document, with the symbol of the medical profession — the caduceus — embossed in gold on the cover. It stood for the Massachusetts health care law, passed in 2006, his final year as governor. Easily the most memorable achievement of his political career, it is now perhaps the biggest hurdle to achieving his presidential dream.

“As long as the symbol was there, that was important,’’ Whitney said. “He wanted to be remembered for that.’’

At the time, Romney thought the revolution in health care that he, more than anyone, drove into law would redound to his benefit as a presidential candidate. Who else on the Republican side had tried to do anything as difficult or ambitious — much less gotten it done?

It has, instead, been linked in infamy, in his critics’ eyes, with the national health overhaul pushed through by President Obama. Romney has given up trying to distance himself from his own creation, though he rejects the comparison to “ObamaCare.’’

The greater question now isn’t whether the Massachusetts overhaul is fairly named as his — it is — but whether the innovative changes he pushed through have worked as intended.

It is a much easier question to ask than to answer.

A detailed Globe examination of voluminous health care and financial data, and interviews with key figures in every sector of the health care system, makes it clear that while there have been some stumbles — and some elements of the effort merit a grade of “incomplete’’ — the overhaul has, after five years, worked as well as or better than expected:

■ The percentage of residents without insurance coverage is down dramatically, to less than 2 percent; for children, the figure is a tiny fraction of 1 percent, a state survey shows. These are by far the lowest rates in the nation.

■ Many more businesses are offering insurance to employees than were before the law. The fear going in was that the opposite would happen.

■ The cost of the changes, while large, has proved manageable thus far, though there are some serious warning signs on the horizon, especially as federal stimulus funds, which have helped defray the cost, run out.

■ The plan remains exceptionally popular among state residents — indeed its popularity has only grown with time. There are some unhappy sectors — notably small business owners, who had hoped to see moderating premiums and chafe, in some cases, at the heavy-handed enforcement of the rules by the state. And support for the requirement that individuals obtain insurance is down to a slender majority, a recent poll shows. But there is no significant constituency here for repeal.

■ And while health care costs continue to grow at alarming rates, as they have nationally, the consensus of industry leaders and health care economists is that this trend cannot be fairly traced to the makeover but rather to cost pressures baked into the existing health care payment system. Massachusetts does have the highest health care costs in the nation, but it owned this dubious distinction long before “RomneyCare’’ was born.

Taken in sum, it is a far cry from what critics of Romney, and of Obama, are saying about the Massachusetts plan. The attacks often rely on distortions, omissions or flagrant inaccuracies, and typically ignore the fact that the law accomplished its principal goal — expanding coverage to nearly every citizen.

“Health reform is virtually a fact-free zone in Washington,’’ said Jon Kingsdale, who was the first executive director of the Commonwealth Health Insurance Connector, the marketplace for insurance plans set up by the 2006 law, and is now a consultant to states preparing to comply with the national law.

“Massachusetts has, since 2006, been the prism through which ideologues attack or promote national policy on health care coverage,’’ Kingsdale said. “In this country, 99.9 percent of the people don’t understand the mind-numbing complexities of the financing of our health care system, so people are free to use factoids to promote or attack any reform.’’

And so when Texas Governor Rick Perry, a possible GOP presidential contender, took a shot in 2010 at the Massachusetts plan, he claimed that, “The number of uninsured people in Massachusetts is about the same as it was when the mandates were passed in 2006.’’

Flat-out wrong, as his office later acknowledged to the Austin American-Statesman.

Or when former Arkansas governor Mike Huckabee — who recently announced that he will not run in 2012 — wrote about the Massachusetts experiment, he pointed to the rapid rise of health insurance rates in the years since it went into effect. But he failed to note that price inflation was by no means limited to Massachusetts. Or that the cost of insurance for families, by far the largest category, had grown even faster in 10 other states, including his own while he was governor.

And then there was Governor Patrick’s experience in Washington, when he went to testify earlier this year about how the Massachusetts plan has worked. Before he could open his mouth, he received this blunt greeting.

“Looking forward to what you have to say about a failed program in your state, MassachusettsCare,’’ said Representative Marsha Blackburn, Republican of Tennessee.

Blackburn didn’t back up her slam at the time, and her office promised specifics to the Globe, but never delivered.

By any reasonable assessment, however, failure doesn’t describe it. And neither does unalloyed success.

It is a work in progress, an experiment at the state level, which Romney firmly believes is where such innovations should be forged and tested.

“You do what you think is right, and, with time, if you’re right, other people will come to understand that or forgive you for your mistakes,’’ Romney said in an interview for this story.

“I think that there is a recognition that what we did with my leadership and that of others was to follow the constitutional principle of states’ rights; that we were a laboratory of democracy,’’ Romney said. “We carried out an experiment, and that’s a right and proper thing to do under the Constitution . . . What the president did was to impose a one-size fits-all plan on the nation.’’

. . .

Perhaps the best way to assess the Massachusetts overhaul is to examine each of the major questions commonly raised about it, starting with the effort’s most fundamental goal — providing access to coverage.

Has the Bay State law, in fact, greatly reduced the number of uninsured in the state?

Yes, without question.

There were various estimates of the number of uninsured at the time the plan went into effect, but the consensus put it around 530,000.

Since implementation, that number has dropped dramatically, by more than 400,000. Whether motivated by the desire for coverage or to avoid the law’s financial penalties for failure to sign on, residents’ acceptance of the plan has been swift and sweeping.

A study conducted for the state in the spring of 2010 by the Urban Institute showed that 1.9 percent of Bay State residents, or about 120,000, had no coverage, down from 6.4 percent in 2006 before the law went into effect. For children under the age of 18, the percentage of uninsured fell from 2.3 percent to 0.2 percent, or about 3,300.

The overall national rate is around 17 percent, with a dozen states, led by Texas, with rates of 20 percent or higher.

Other surveys, including those by the US Census Bureau, have found somewhat higher rates of uninsured here before and after the law passed — generally two to three percentage points higher. But Sharon K. Long, the University of Minnesota’s School of Public Health professor who helped design the Bay State surveys, said the disparities are attributable to differing survey methods but all the surveys agree on the core trend.

“The downward trend in uninsurance is consistent across them all,’’ she said.

Is the law bankrupting the state Treasury, as some of the partisan critics claim?

No, but there is cause for concern. There is no certainty the state can afford the program’s cost indefinitely if the underlying costs of health care continue to soar.

The overall price tag is undeniably large — a projected $2.112 billion for the fiscal year ending June 30, according to data provided by the office of Jay Gonzalez, Patrick’s secretary of administration and finance. But the state’s share is less than a fifth of that sum — $406 million, up from $33 million in the year before the law went into effect. That’s down from a peak of $486 million in 2008, when the number of newly insured surged more than anticipated.

This is a daunting, but not unsustainable, price tag if health care costs can be contained.

“This has not come close to breaking the state’s bank,’’ Gonzalez said.

The rest of the tab is covered by federal reimbursements, and by hospitals and insurers.

Over the five-year life of the new law, total cost has been $9 billion, with the federal government picking up nearly 64 percent of the cost, the state’s share is more than 18 percent, and the remaining 18 percent split by hospitals and insurers, who pass it along to their customers, to pay into the Health Safety Net fund, which reimburses providers for treating the uninsured. The federal share consists of the usual 50 percent reimbursement for Medicaid, supplemented by stimulus money and additional funds awarded the state for its innovative program to subsidize insurance of the working poor.

Many of the more than 400,000 Massachusetts residents who have become insured since the law’s enactment receive coverage paid in whole or in part with public funds.

What has been challenging is meeting these added costs at a time when state revenues have plunged with the foundering economy.

The state has needed new revenue sources to fill the gap. In fiscal year 2009, the state pushed through a $1-a-pack increase on the cigarette tax to raise an estimated $150 million to $175 million annually and also imposed one-time assessments totalling $50 million on hospitals and insurers to plug a projected budget shortfall the same year, with all proceeds earmarked for health overhaul-related costs.

The cigarette tax, however, has fallen well short of estimates. It raised $130.5 million the first year, and has been tracking still lower through the first 10 months of this fiscal year, according to the Office of Administration and Finance.

Another source of concern is that the state, during the economic downswing, relied heavily on federal stimulus funds — $582 million over three years — to meet the expense of the health overhaul. But that revenue source, designed to offset some of the expense of the unemployed moving onto Medicaid, expires June 30, meaning the state will have to come up with almost $200 million from another revenue source next year.

Without the bonus federal Medicaid funds, the price tag for the state’s share will rise from about 1.2 percent to about 1.8 percent of the total state budget.

The Patrick administration hopes, however, that as the economy slowly rebounds, Medicaid enrollment, and its attendant costs, will ebb. Enrollment in MassHealth, the state’s Medicaid program for the poor and disabled, has risen by 252,000 in the last five years, with about a quarter of that growth attributable to the health care overhaul. The rest, according to the Massachusetts Medicaid Policy Institute of the Blue Cross Blue Shield of Massachusetts Foundation, can be traced to the grim economy and swollen ranks of unemployed and newly poor.

Patrick’s and the Legislature’s versions of a proposed $30.5-billion budget for 2012 include basically no increase in either Medicaid or health related costs, maintaining the state can achieve savings through some service cuts, payment reform and other changes.

The administration has already made some progress toward that goal, drawing lower bids from insurers for program’s subsidized policies. But few think Medicaid costs can really be held in check.

“Let’s just say that having Medicaid be flat in next year’s budget is unrealistic,’’ said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, the business-backed budget watchdog group that supported the 2006 law. “In 2012, all bets are off in terms of whether they can achieve the Medicaid savings.’’

. . .

Has the overhaul reduced, as predicted, the quantity and cost of so-called free care provided at safety-net hospitals and health centers?

Yes, but the numbers are rising again.

Before the new law, the cost of treating the uninsured was $656 million in fiscal 2006, a report by the office of administration and finance says. This year it’s carried on the state’s balance sheet at a projected $420 million, which makes it look like there has been a significant drop in this costly category of care.

But it leaves a false impression.

The Massachusetts Hospital Association says those figures do not reflect all the costs they absorb by treating uninsured patients. The real cost was $70 million more last year and about $120 million more this year, they say.

In the fine print of its budget submissions, the Patrick administration estimated the Health Safety Net fund shortfall, which hospitals must absorb, at between $100 million and $125 million this fiscal year and between $100 million to $150 million next. The shortfall represents the cost of services to the uninsured beyond the available funds in the account, which is largely financed by hospitals and insurers with smaller amounts from the state and federal governments.

The full cost of treating the uninsured, if the hospital group’s estimates are accurate, is more like $540 million this year and $580 million next, and slightly less if the administration’s numbers are on target. In either case, it’s a lot more than the $420 million supporters of the law often point to as evidence of the program’s success.

And the total is growing, for reasons not fully understood, though state officials believe the effects of the weak economy have had a significant impact.

Another factor may be a shortage of primary care physicians, particularly in Western Massachusetts and Cape Cod, a long-standing problem which tends to drive patients without easy access to a doctor to an emergency room for care. The early years of the Massachusetts health law coincided with a sharp decline in the percentage of physicians practicing internal and family medicine who were accepting new patients.

’’The shortage has been intensified by the increased demand for services that resulted from health reform,’’ said Dr. Thomas C. Hines, president of the Massachusetts Academy of Family Physicians and director of the Family Medicine Residency Program at Boston Medical Center. “It did appear to unmask a real shortage of primary care services.’’

A separate grievance of the hospitals is an unfulfilled promise of the health care legislation. The law specifically promised to raise Medicaid funding in $90-million increments for each of the first three years of the plan to close the gap between reimbursements and the cost to hospitals of care for the poor who depend on the federal-state program. It was a pledge critical to the hospitals’ decision, in 2006, to join in the push to enact the sweeping plan.

But when the economy collapsed in the fall of 2008, the second year of the overhaul, state revenues were crushed and the extra Medicaid funding was among the casualties.

Hospital association president Lynn Nicholas, in a March 1 letter to House Ways and Means Chairman Brian S. Dempsey, said “the cost-payment disparity for hospitals is now greater than it stood in 2006.’’ Hospitals estimate they receive on average about 72 percent of the actual cost of care.

’’Commercial carriers are not going to fully take that,’’ said Timothy F. Gens, the hospital association’s executive vice president, of the shortfalls hospitals try to recoup from other payers. “Now, they’re resisting taking any of it.’’

. . .

Have the individual and employer mandates — political kryptonite to many in the current GOP presidential field — worked?

Yes. The number of uninsured individuals is way down, and the percentage of businesses offering insurance to employees is up.

Opponents of mandates on business had predicted that employers, rather than offer coverage, would choose to pay the penalty and let their lower-income employees apply for subsidized insurance instead.

In fact, the opposite occurred here.

Before 2006, 70 percent of employers offered coverage, 10 percentage points above the national average. In 2009, the figure in Massachusetts was 76 percent, according to the Massachusetts Employer Survey by the state’s Division of Health Care Finance and Policy. The national rate remained at 60 percent.

There has, however, been one unexpected side-effect of this success. Because more businesses chose to insure employees rather than pay the $295 per-employee penalty, revenues from the penalty have run well below expectations. Some $48 million per year was projected, but actual yield has been, on average, a third of that or less.

And there are some who feel aggrieved at the way the mandate has been enforced.

Indeed, some of the loudest complaints about the health law have come from those the state has pressed to either offer insurance or pay the penalty — or “fair share contribution’’ as the state calls it. Enforcement of the rule falls to a 25-person unit within the state’s Division of Unemployment Assistance, and their work has prompted periodic howls of protest.

Julie Gadziala, owner of Encore Staffing Services in Lawrence and Manchester, N.H., counts herself one of the victims.

“I did everything by the book,’’ said Gadziala, who supplies businesses with temporary clerical and industrial workers. “I’ve offered my employees, including the temps, insurance since 1999. I supported health reform. Little did I know I’d be caught up in this ‘fair share’ nightmare.’’

The requirement she tripped over was that, to avoid the penalty, at least 25 percent of her employees had to take the insurance she offered. A state audit found she had fallen short of that threshold and owed $112,831, plus 12 percent interest.

She appealed and won after a year-and-a-half of costly legal wrangling when a hearing officer ruled that more than 25 percent of her employees had taken insurance. The state, however, this spring told her it was reopening the case, prompting her Boston attorney, Sean T. Ryan, to call it “an egregious abuse of their power.’’

Last week, after inquiries by the Globe, the agency informed Ryan it was dropping the case.

At the other end of the spectrum is Jason Regis, owner of Hodgie’s, a mom-and-pop ice cream stand in Amesbury that is open 27 weeks a year. He found himself on the short-end of a ruling in 2009 that his 36 part-time employees, almost all of them high school or college students covered by their parents’ insurance policies, worked slightly more hours than 11 full-time employees would have during one quarter of the year.

He promptly paid the $847 penalty but feels he was needlessly squeezed.

“Does this sound like an employer-friendly state?’’ asked William Fields, a Sandwich-based consultant who has represented Hodgie’s, Gadziala, and dozens of other businesses before the Division of Unemployment Assistance in “fair share’’ cases. Going after Hodgie’s cost the state far more than it took in, he said.

Revenue from penalties imposed on individuals who fail to obtain insurance has declined each year as more people purchased coverage. For 2010, the state so far has taken in $9.6 million, down from $16.1 million in 2009 and $19.6 million in 2007, Department of Revenue figures show. The penalty this year will range up to $1,212 for an individual.

In 2008, the last year for which data is available, 22,000 residents were exempt from the mandate because the cost of insurance was deemed too much for them to afford, under health connector guidelines. In addition, some who would otherwise be required to buy insurance are allowed to apply for a “hardship waiver’’ that sets aside any penalty.

The connector has wide latitude in granting the waivers, which can be based on potential home foreclosure, utility shutoffs, family deaths, or caring for a family member with an extended illness. The agency has granted one-year waivers to an average of 1,581 individuals per year, roughly 60 percent of those who appealed their penalty.

Critics of the overhaul often cite the exemptions and waivers as evidence of backsliding from the mandates.

“Health reform is about insuring people, not unnecessarily penalizing them,’’ said Dick Powers, the connector spokesman. “With more than 98 percent covered, the approach is working remarkably well.’’

. . .

Should Romney reap the credit — or some would say, the blame — for how the health care overhaul has worked out?

In some ways no — despite his key role in the passage of the law.

Romney was the main advocate for the insurance requirement for individuals — he wanted to wring the “free riders’’ out of the system. But he hated the employer mandate and vetoed the provision that employers of 11 or more offer coverage or face a penalty of $295 per employee. This veto, and seven others aimed at less controversial aspects of the law, were easily overridden by the Democratic Legislature.

Romney considers the Massachusetts plan needlessly gold-plated; he would have pushed for a much cheaper version that allowed minimal coverage options.

He believes the Massachusetts health connector, the insurance exchange which the Obama plan would emulate, has created an excessive regulatory burden, imposing too many requirements on what commercial insurers must offer for a policy to qualify as “minimum creditable coverage’’ under the law. His proposal, to require only a bare-bones policy that covered hospitalization and catastrophic illness, was rejected by the Legislature.

On these counts, Romney’s positions are generally in line with conservative orthodoxy — that individuals should be allowed to purchase the coverage they believe they need rather than what a government agency says they need, opening up the marketplace to the power of consumer choice.

“This idea of mandating the benefits that must be included in every policy, that’s the wrong way to go,’’ he said in a recent interview. “We wanted no mandated benefits.’’

Romney also wanted a way for those of means to opt out of the mandate by posting a bond — essentially a promise to pay for future uninsured health care costs. Critics called it a “fig leaf’’ and Romney concedes that few would have taken advantage — just as only a handful choose a similar option to post a $10,000 bond rather than buy compulsory auto insurance in Massachusetts.

But the principle mattered to him, and the failure of the Legislature to agree still rankles.

“That made sense and that’s why we put it in, and darn if I couldn’t win on that one,’’ he said.

And as for those on the economic margin, Romney thought that no one, however poor, should get insurance for no cost at all. He advocated a small premium, even a few dollars a month, for the neediest, but the Legislature balked.

“When you give something away that is entirely free, people don’t value it as much as they should,’’ Romney said.

. . .

What group is most unhappy about the changed health care landscape in Massachusetts?

Small business owners, in a landslide.

“I’d give it an ‘A’ for access and an ‘F’ for cost and small business fairness,’’ said Jon B. Hurst, president of the Retailers Association of Massachusetts. “We were supposed to get rid of the free care pool and get all these young folks insured, and that was going to bring costs down.

“Instead, what we did was a wealth shift from consumers and small businesses to big health care in the state, which is not a surprise given who was pushing the bill all along — the biggest hospital chain and the biggest insurer,’’ Hurst said, referring to Partners HealthCare and Blue Cross Blue Shield of Massachusetts.

Partners, because of its market clout and ability to negotiate higher rates from insurers, has been blamed by some for helping to drive up medical costs. The company has said its prices reflect the complexity of care provided by its physicians and teaching hospitals.

The retailers association surveys of its 3,200 members showed a 15 percent average increase in recent years in insurance premiums — a ruinous long-term trend.

Plans offered to small businesses through the connector offer no greater savings than those in the broader commercial market and are limited to a few smaller insurers, said Hurst.

Dick Powers, spokesman for the connector, said in an e-mail: “The value proposition we bring to the table is the ability for small businesses to easily shop on our website and make apples-to-apples comparisons among the plans.’’

The connector has acknowledged that the limited number of insurers offering plans under the connector’s Business Express program that was launched in early 2010 has been a shortcoming. Currently only Neighborhood Health Plan, Health New England, and CeltiCare Health Plan offer plans under the program. But Powers said Blue Cross Blue Shield plans to begin participating this fall, increasing choices and competition.

“In the past, the other carriers [Tufts, Harvard Pilgrim, and Fallon] have said they will come on board when [Blue Cross Blue Shield] does,’’ he said. “It is our expectation that they will.’’

Business Express, the coverage plan open to employers with 50 or fewer employees, now has more than 4,500 members.

. . .

On the campaign trail, Romney hasn’t taken the step many of his critics say he must, disavowing the Massachusetts plan he pushed into law. But he also is vehemently critical of the Obama approach, which mimics and builds on the Massachusetts model in many respects.

“A lot of pundits around the nation are saying that I should just stand up and say this whole thing was a mistake, that it was a boneheaded idea, and I should just admit it,’’ Romney said in a May address at the University of Michigan Cardiovascular Center in Ann Arbor. “But there’s only one problem with that: It wouldn’t be honest. I, in fact, did what I believed was right for the people of my state.’’

Romney’s approach now is to call for repeal of “ObamaCare’’ and replace it with a plan that gives states flexibility to come up with their own reforms.

It bears little resemblance to the Bay State experiment, includes no mandate for individuals to buy insurance, and would create tax incentives for individuals to purchase their own coverage.

Still, in the halls of the State House, there will be a reminder for generations to come of who, more than anyone, brought near-universal health care coverage to one state in the nation. It is that portrait of the 70th governor of Massachusetts — Mitt Romney — with a symbol of the landmark health law at his side.